It’s official, there are more 401k millionaires than ever before, according to mutual fund behemoth Fidelity Investments’ latest quarterly report.
Around 168,000 plan participants have $1 million or more in their account—an increase of 49,000 people compared to this time last year.
What’s even better, data show Americans are doing better overall when it comes to saving for retirement.
After losing a little footing in the beginning of the year, Boston-based Fidelity reported that 401k accounts had bounced back by the end of July.
The average balance rose 1 percent to $104,000 between the first and second quarters—only slightly less than the all-time high of $104,300 reported at the end of 2017. The figure represents a 6 percent increase from this time last year, when the average balance was only $97,700.
Fewer workers are dipping into their accounts, too. The percentage of participants with outstanding 401k loans has reached its lowest level in almost a decade. Just 20.5 percent of savers have borrowed against their account. The lowest reported percentage was 19.9 percent in the second quarter of 2009.
“The stock market’s performance over the past several years has definitely helped retirement savers, but now would good time for investors to take a moment and make sure they are doing their part to meet their retirement goals,” Kevin Barry, president of workplace investing at Fidelity Investments, said in a statement. “Markets may go up and down, but there are a number of steps individuals can take, such as considering a Roth IRA, increasing your savings rate and avoiding 401k loans, which can play an important role in their long-term savings success.”
Oh, What a Difference 10 Years (and Auto Enrollment) Make
Auto enrollment has more than doubled in popularity over the course of the last decade, with 33 percent of 401k plans now utilizing the feature. In 2008, a mere 15 percent of plans auto-enrolled new employees.
When focusing solely on larger companies—those with more than 50,000 employees—the percentage that automatically enroll workers increases drastically to 61 percent.
“As retirement savings plans continue to evolve to meet the changing needs of today’s workforce, it’s clear the one feature that has really had a positive impact on the retirement landscape over the past decade is auto enrollment,” Barry said. “Auto enrollment positioned an entire generation of workers to build their retirement nest eggs.”
Fidelity’s report went on to outline several of the positive impacts of auto features, including:
- Employers are increasing the default savings rate. The average rate for employees who are automatically enrolled in their 401k rose to 3.9 percent in Q2 after five straight quarters at 3.8 percent. In addition, the percentage of employers that default at 6 percent or more has more than doubled over the last decade—now almost one in five employers utilize a default savings rate of 6 percent or higher.
- Employees who are automatically enrolled stay in their plan. Average participation rates among plans with auto enrollment were 87 percent in Q2, compared with a participation rate of 52 percent among plans that do not auto enroll. The impact was especially significant among Millennials, who were participating in these types of plans at a rate of 87 percent at the end of 2017—more than double the rate of Millennials in plans that did not auto enroll (41 percent).
- Employees who are automatically enrolled tend to save more. Since 2008, the average savings rate among employees who were automatically enrolled in their 401k has increased from 4.0 percent to 6.7 percent. Also, workers who are auto enrolled are becoming less inclined to “set it and forget it”—over the past 10 years, nearly two-thirds (63 percent) of auto enrolled employees have increased their savings rate.
Jessa Claeys is a writer, editor and graphic designer.
